Health Care Costs Rise 7.5% in First Half of
2004

December 2, 2004 (PLANSPONSOR.com) - Medical costs
rose faster than worker income in the first half of 2004,
according to a survey by the Center for Studying Health
Systems Change and the Employee Benefit Research
Institute.

Reuters reported that private-sector spending on health
care rose 7.5% in the first half of 2004, equaling the
growth rate seen last year in the same time frame. This
significantly outpaces the growth seen in the economy as a
whole.

History shows that when medical costs – those made up of
prescription drug, hospital and doctor costs – grow much
faster than the economy, more people are left uninsured,
according to Reuters. Although 44 million Americans are
already without insurance, the number is still set to
grow.

This 7.5% figure, surprisingly, is still lower than the
2002 total, when 10% cost increases were noted. However, as
recently as 1998, the cost increase was only 4.6%. The
number seems to have leveled off at a fairly high rate,
according to the study.

For consumers on private insurance, the situation is
just as bad, Reuters reports. Since underlying health costs
determine the premiums paid for insurance, large increases
are most likely to continue.

Breaking down the 7.5% total, hospital prices rose by
7.7% in the first half of the year. Reuters reports that
this is most likely due to a nursing shortage that is
forcing hospitals to pay more to keep nurses on. Although
prescription drug prices are often blamed for the overall
increase in the cost of health care, the survey actually
states that the drug cost increase tempered the overall
number. The total increase for drugs was 8.8%, which was
down from the 9.6% rise seen in the second half of last
year. Patent expirations account for much of this decrease,
Reuters is reports.

The data for the survey was collected from the Milliman
Health Cost Index, which is designed to reflect claims
experienced by private insurers in a typical insurance
policy.